The Markets are Nocturnal, but Not This Year
Revisiting an old observation…
Most of the stock market’s volatility comes in the daytime (open-to-close), but most of the market’s gains come overnight (close-to-open).
The graph above shows two hypothetical traders. The first (grey) is only long the SPY from each day’s open to close (daytime), and the second (red) from each day’s close to the following open (overnight).
Note that (a) the daytime session is about 60% more volatile, and (b) all of the SPY’s long-term gains since 1993 have come overnight and most of its long-term losses during the day.
That’s not the case this year, with all the market’s gains coming in the daytime session and both sessions being about equally volatile. Same chart, YTD…
Significance? Not sure.
In my past tests, I’ve never found a strong use for the daytime versus overnight relationship, other than polite dinner conversation.
I was digging back into the subject, and thought an updated chart was in order. As always, more to follow.
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Filed under: Stock Market Mechanics | 6 Comments